Last year, Peter Sznip did his Christmas shopping the time-honored way -- hitting REI and Ann Taylor stores and paying with real old-fashioned money. But this year he's discovered a newer way to bankroll his gifts: frequent-flier miles.

On Frontier Airlines' Web site, the Denver consultant recently bought a five-piece Tumi luggage set (cost: 32,000 miles) and a pair of diamond earrings (37,000 miles) for his wife. "I'm a value shopper," he says.

After years of trying to get frequent fliers to sign up for hotel stays or magazine subscriptions, now carriers are upping the offerings -- letting travelers trade miles for flat-screen TVs, jewelry, even cars. Frontier recently auctioned a Mercedes SUV. In November, Continental Airlines tripled the offerings in its Miles for Merchandise store to 3,000, including 405 golf-related items. Also last month, United Airlines began a trial online store where fliers can cash in miles for Nautilus treadmills and portable hot tubs, and launched an auction area where travelers have bid on Chrysler Crossfire cars and heli-skiing trips. (One catch: Air fare's often not included.)

But are these good deals? To find out, we logged in to the sites of major domestic carriers and sorted through everything from stuffed animals and windbreakers to Montblanc pens. Then we found the lowest retail prices for these items from online and traditional stores and calculated whether we would be better off buying them with cash or with miles. (More on our calculations in a bit.) When it was all over, we'd turned up some decent deals, like Maxim magazine -- ours, for an entire year, for just 400 Delta miles. But we found other reasons to keep hoarding our miles. One reward offered by American Airlines for flying 5,889 miles, roughly the distance between Los Angeles and Moscow? A Starbucks certificate worth $25.

Airlines have never had a greater incentive to offer merchandise for miles. In part, carriers are eager to get rid of miles because they represent a liability on their balance sheets. They also know fliers are frustrated when they can't redeem miles for trips: Last year, there was an 11.4 percent drop in the miles flown by reward travelers among 14 domestic airlines from the previous year, according to a study by IdeaWorks, a Wisconsin airline consulting firm.

At the same time, the number of unredeemed flier miles in the U.S. market has kept mounting, hitting an estimated nine trillion this year, up 50 percent in the past five years, according to Frequent Flyer Services, publisher of FlyerTalk magazine and the online site WebFlyer. The glut can be credited primarily to frequent-flier credit cards. Banks benefit from rewards cards, of course, because they cash in on the big spending associated with them. Airlines, meanwhile, get a cut each time the cards are used -- as much as 1.5 cents per mile that card-users earn, according to analysts. Because the banks that issue these cards are often major airline creditors, carriers and banks alike have an interest in keeping these credit cards on the market, and the awards miles flowing. The result: Airlines have a lot of miles they'd like to soak up, and they want members to feel like their miles are worth something.

"It used to be people earned miles from buying presents," says Frequent Flyer Services' Randy Petersen. "This is the first Christmas people will be earning presents using their miles."

Determining the value of airlines' latest offerings requires a bit of basic math. Not so long ago, frequent travelers valued each mile at roughly two cents apiece -- the price of a typical airline ticket ($500) divided by the number of miles commonly used to get one (25,000). But lately, many airlines have made some seats available at 25,000 and more at 50,000 miles, while increased competition means many flights are available for $200 or $300. That has lowered the effective value of a mile, pegging it now at closer to one cent. (Indeed, for their own bookkeeping, airlines generally value each mile at about a penny, according to IdeaWorks.)

The rule of thumb: If you can make a mile buy at least a cent or two worth of goods, go for it. "The gap is closing," says Joe Brancatelli, publisher of a Web site for business travelers called Joe Sent Me. "Not because the merchandise is getting better, but because the value of tickets is plummeting."

Our survey revealed a wide range of buying power: Customers who pick American's Starbucks coffee gift certificate, for example, are getting less than one-half of a cent for each of their miles, and customers signing up for a Norelco shaver on United are cashing miles in at a rate of a penny apiece. Compare that with the Mercedes sport-utility vehicle one Frontier flier snagged for 1.1 million miles last summer: The ML350 SUV retails for more than $40,000, so the new owner managed to stretch each mile to buy 3.5 cents worth of car. (The airline declined to identify the buyer, and says it isn't planning to auction another car.)

Doug Hershey got a new set of wheels on United's auction site, and figures he got a deal as well. "I was getting so many miles I was getting concerned about my ability to use them," says the physician from Sacramento, Calif. So when Dr. Hershey spotted a 2005 Chrysler Crossfire there, he researched the car, pegged its value at $28,000 and decided his maximum bid would be two cents a mile, or 1.4 million miles. He won -- and now he figures his other car, a BMW 7-Series, will spend many days in the garage. "I had a feeling it would be good cocktail-party conversation," he says.

Frequent-flier Alan Grayson, though, has decided it's better to fly. The lawyer in Orlando, Fla., has eight million miles on various carriers, and he often uses them to buy his family of seven first-class tickets to spots around the world. His family just flew to Japan on tickets that would have cost $16,000 apiece; he got them for 120,000 miles each, or about 13 cents a mile. But with domestic trips so cheap and the hassle of redeeming miles so high, he says, it's not worth spending the miles. "You might as well get a toaster," he says.

The idea of redeeming points for merchandise isn't new, of course: Credit cards, rental-car companies and hotels have long had similar programs. Airlines have sporadically offered various goods, though magazine subscriptions have been one of the few constant products. Carriers' offerings expanded after Sept. 11: With some travelers reluctant to fly, many airlines began trading miles for discounted hotel rooms, car rentals and cruises. American began allowing its members to convert miles to Diner's Club points, while Continental introduced its Miles for Merchandise program. Points.com, a Web site that started as a place to swap miles between airlines, began letting members use miles to buy gift certificates for stores.

But even when the price is right, would-be Santas should proceed with caution. Cashing in miles for presents can reek of re-gifting -- especially if the miles were earned on business travel. Patricia Sznip of Denver, for one, loved the diamond earrings her road-warrior husband bought with Frontier miles. But in the end, she'd have preferred having him pay in cash. "I'd rather have him home," she says.

Below, our look at five carriers and their miles-for-goods programs:

American

GOOD DEAL: FTD $15 gift certificate, 1,389 miles (one cent a mile -- not bad for this airline)
NO DEAL: Fairmont Hotels $25 gift certificate, 5,556 miles (less than half a cent a mile)
American was at the forefront of the miles-for-merchandise movement: It was one of the first airlines to let fliers convert miles into Diner's Club points, and to let members redeem miles for gift certificates on Points.com. That site remains the primary way to burn off AA miles, in exchange for certificates from Crutchfield Electronics, Eddie Bauer, J.C. Penney, American Eagle, Marriott and Fairmont Hotels, and others.
In general, we noticed, the redemption rates on Points.com were less generous than on other airlines' in-house sites -- with miles typically buying a penny's worth of merchandise or less. Still, we discovered some miles went farther than others, and AA's were among the best. American fliers can snare a $25 certificate from Eddie Bauer for about 3,500 miles on Points.com, for example, while an Alaska Airlines user would shell out more than 12,000 miles for the same certificate. A spokesman for the Web site says the conversion rate is up to the airlines.

Continental

GOOD DEAL: Panasonic 42-inch Plasma Television, $1,602.90 plus 100 miles.
NO DEAL: Circulon 10 1/2-inch Toss & Turn Pan, $30.17 plus 100 miles.
Continental not only tripled the offerings in its online Miles for Merchandise store last month, but also expanded the online auction site it introduced in 2002. Offerings tend toward unusual items, such as a remote-control indoor helicopter or an autographed Roger Clemens baseball jersey. One recent sale: A banquet table for 10 set up near the finish line of the New York Marathon, for 122,000 miles.
This may go some distance toward soothing customers who've had difficulty getting frequent-flier travel: Last year Continental redeemed 1.2 million rewards, according to IdeaWorks, down 17 percent from 2003 and tied with America West for the airline with the biggest yearly drop. Continental says the number of awards it redeemed actually rose 5 percent in 2004, to 1.52 million, and attributes the discrepancy to a change in the way the airline calculates redemptions. Either way, says OnePass programs-manager Victor Llana, the number of fliers who use the auction and merchandise sites is a "drop in the bucket" compared with those who redeem miles for travel.
Continental frequent-flier Michael Konowicz says he'd much rather avoid the effort of trading points for flights. The Hainesport, N.J., meteorologist flies for fun every six weeks, spending weekends in Hong Kong or Amsterdam, and generally has about 400,000 miles in his account. But instead of spending it on travel, he's been using the airline's auction site. Recently, he spent 70,000 miles to adopt a koala bear at the Houston Zoo -- getting photos, a stuffed koala and zoo tickets. "It's a lot less of a hassle than to try to redeem," he says.
In some ways, Continental makes it unusually hard to shed miles. Its online Miles for Merchandise area generally charges a token 100 miles per item, plus cash. The Panasonic plasma TV was a deal at about $1,600 plus 100 miles -- about $400 cheaper than we found the same model elsewhere on the Web. But shop around: We found the Circulon pan for $10 less elsewhere on the Web.

Delta

GOOD DEAL: 28 issues of Fortune at 2,800 miles (two cents a mile)
NO DEAL: There's nothing to buy besides magazines
Delta has led the pack in award travel redemption for the past two years, according to IdeaWorks, redeeming 2.9 million tickets in 2004 and 2.8 million tickets in 2003, a year-on-year increase of 3.6 percent. Perhaps that's why the airline hasn't rushed to come out with ways for members to use miles, beyond its longstanding Magazines for Miles offer.
But if you're a magazine fan, all the better: We found 12 issues of Maxim for 400 miles and 51 issues of Business Week for 1,000 -- yielding us a rich three to four-and-a-half cents per mile. Still, it may not be easy to get them. Steven Tallman has 30,000 miles on Delta that he never uses and would love to redeem. The consulting-firm partner tried to shed a few of them by signing up for magazines through the airline. He never received the magazines and the miles were never deducted from his account.
Delta says it isn't currently planning to add other miles-for-merchandise plans. The airline did, however, recently start offering another way to use miles. In May, it introduced a SkyPoints credit card with American Express. Like Amex's old Delta Skymiles card, it lets members use their miles to earn free tickets, but this one also lets them convert any number of points into discounts on Delta fares. That means users can get travel discounts without amassing the usual 25,000 or so miles for an entire free ticket.

Frontier

GOOD DEAL: Tumi five-piece luggage set, auctioned for 32,000 miles (almost seven cents a mile)
NO DEAL: Frontier stuffed animal collection, 7,500 miles
Denver-based Frontier Airlines has no international flights beyond Mexico and no first class. That makes it especially important, the airline says, to find perks for loyal customers -- like luggage, jewelry, cars and one-off trips. "This needs to be our first class," says a spokesman.
Frontier is primarily using its auction site, launched in June, to push one-off goods -- the site is currently auctioning a basketball signed by Denver Nuggets' Carmelo Anthony -- and unusual experiences. It recently auctioned a trip to San Diego, including box-seat tickets to an Eagles concert, for 19,500 miles. (The flights alone, for four, would have gone for 60,000 miles).
Trevor Rhodes, who coordinates sponsors for running races, had around 70,000 Frontier miles when he started bidding for items on the airline's More Store. The resident of Boulder, Colo., lost out on a mountain bike and a golf trip, but when he saw a package for a Bruce Springsteen concert in Seattle, including four fifth-row tickets, he pounced. His winning bid: 32,000 miles, which included airfare, hotel and rental car. "I love Seattle, I love Bruce," he says. Mr. Rhodes used to use his miles on free travel but he says he won't be doing that anymore. "I'd rather buy an experience."
The buys we found here were better than on other carriers' sites. The airline says that's partly because it's receiving many of its offerings from local merchants in exchange for miles that the merchants pass on to customers. (The Mercedes SUV it auctioned came from a local dealer.) But prices could rise. "There are some ridiculous deals on the auction right now," says a Frontier spokesman. "As more people use it, that might not always be true."

United

GOOD DEAL: Judith Lieber Star Pillbox, 19,000 miles (1.5 cents a mile)
NO DEAL: Toshiba 62-inch Integrated HD DCP TV, 265,000 miles (one cent a mile)
United, too, just ramped up its options for members to buy gifts. "We're looking for creative ways to let members use miles for things beyond air travel," says a United Airlines spokeswoman. The airline's auction, which launched in November, tends to feature one-off excursions, such as a diving trip to see sharks, a yoga-and-chocolate retreat in Mexico, and rides in a biplane. The caveat: Unlike the trips auctioned on, say, Frontier, some do not include hotel stay... or even air fare.
The carrier is also experimenting with an online store, which for now is being tested on a small group of fliers selected at random. Mileage Plus Online's quirky selection included a portable hot tub (65,500 miles), an electric scooter (21,000 miles) and four choices of massage chairs (45,000 to 225,500 miles). Compared with other airlines, values were middling: Most items are priced around one cent a mile.
United also offers Mileage Plus Music, which lets members redeem 10,000 miles for 100 tracks or 10 albums on Sony Connect. Mileage Plus Reader Awards promise subscriptions in exchange for miles, but in four of the five big markets we checked, we found only one title available... The Wall Street Journal. The airline promises 13 weeks of the paper for 1,200 miles. The standard subscription rate for that period is $59, which means fliers are getting almost five cents' worth of Journal for every mile -- making it a cheaper buy here, mile for mile, than Maxim or a Mercedes.